SBA braces for flood of feedback on 8(a) rule changes

By Robert Brodsky

December 8, 2009

About 200 people are expected to attend a two-day meeting in Washington this week to offer comments on proposed rule changes to the Small Business Administration's 8(a) Business Development program, according to agency officials.

The potential revisions to the 8(a) program also are expected to draw large crowds outside the Beltway as SBA holds public meetings during the next six weeks in nine other major cities.

"We are going to places with a high concentration of 8(a) firms," said Joe Loddo, SBA's associate administrator for business development. "These are significant changes that have not been looked at for 10 years. We wanted to be as participatory as possible and give everybody an opportunity to comment."

The proposal, published in the Federal Register in October, would significantly modify 8(a) eligibility and income requirements, and would tighten rules that have allowed large firms a slice of certain noncompetitive 8(a) contracts.

As of Monday morning, 76 people had registered to offer comments on the rule changes during a Thursday session in Washington and another 35 had signed up for Friday, Loddo said. The agency expects 100 additional people to show up during the two days.

Beginning on Dec. 16, SBA is taking its 8(a) show on the road with public meetings in New York City; Seattle; Boston; Dallas; Atlanta; Miami; Albuquerque, N.M.; Chicago; and Los Angeles. The stops in Seattle and Albuquerque will include an additional meeting to deal exclusively with tribal concerns and issues.

"SBA considers tribal consultation meetings a valuable component of its deliberations and believes that this tribal consultation meeting will allow for constructive dialogue with the tribal community, tribal leaders, elders and elected members of Alaska native villages or their appointed representatives," the agency said in a Federal Register notice on Monday.

One of the most significant changes to the program would modify regulatory language that allows large corporations to partner with Alaska native corporations -- an 8(a) group that is considered a permanent small disadvantaged businesses -- on contracts in which the larger firm does virtually all the work. These joint ventures are considered small businesses eligible to receive high-value contracts without competition.

The proposed rule would prevent large firms in joint ventures from acting as subcontractors to 8(a) firms on sole-source contracts. The 8(a) firms would be required to perform at least 40 percent of the work on joint ventures.

"We think these changes will tighten up the program by closing up some loopholes that are allowing large businesses to access the program and by making sure that small businesses are getting what they are due," said Margot Dorfman, chief executive officer of the U.S. Women's Chamber of Commerce.

In addition, small businesses owned by tribes, ANCs or native Hawaiian organizations would be required to submit information to SBA showing how their 8(a) participation has benefited their local communities through, for example, funding cultural programs and providing employment assistance, jobs, scholarships and internships.

Other proposed changes would clarify the size, income and familial determinations needed to enter the 8(a) program. For example, SBA is considering excluding individual retirement accounts from the net worth calculations that are used to determine eligibility for the program. The agency also proposed that applicants not be considered economically disadvantaged if their adjusted gross income is more than $200,000, or if the fair market value of their assets exceeds $3 million.

To remain in the program, participants must show that their adjusted gross income during the two preceding years did not exceed $250,000 and their total assets were not more than $4 million.

SBA also proposed easing the restriction preventing family members of 8(a) participants from entering the program. Relatives of program participants could gain access if they operate in different industries, are qualified to run their firms and are judged not to be a front for their family member's company.

In total, SBA is asking for comments on 10 areas of revision to the 8(a) program. In the weeks since the notice was issued, the agency has received dozens of written comments, but relatively few focused on the content of the changes, according to Loddo. The majority, he said, requested an extension to the Dec. 28 deadline for comments due to the complexity of the rule changes. The agency has obliged and plans to announce later this week that the deadline has been extended to Jan. 28, 2010, Loddo said. SBA expects to issue its final rule by June 2010.

The Washington meetings will take place from 9 a.m. to 4 p.m. on Thursday, Dec. 10, and Friday, Dec. 11, at SBA's offices at 409 Third St., S.W. Participants may submit written comments in lieu of oral testimony. Those wishing to testify must pre-register by contacting Latrice Andrews of SBA's Office of Business Development at Latrice.Andrews@sba.gov or (202) 205-6031.